In 1965, health care coverage for seniors in America changed dramatically with the passage of Medicare, and largely remained unchanged until 2010, when the Patient Protection and Affordable Care Act (ACA) was signed into law. The ACA attempts to strengthen Medicare by increasing coverage while also controlling costs. This article will focus on how the ACA will impact seniors, including those who may not yet qualify for Medicare.

Before the ACA

Before the Affordable Care Act, seniors, defined as those who are retired or living on pensions, obtained health care in a variety of ways. Those over the age of 65 automatically qualified for Medicare. Those under 65 could obtain insurance by keeping a job that provided health benefits up to that age, by maintaining health benefits through a pension, or by purchasing their own private policy.

The problem was that Medicare costs were rising at an unsustainable level. From 1985 to 2009, Medicare costs grew at an almost nine percent rate every year, compared with five percent growth in both the GDP and medical care inflation during those years. [1] In addition, Medicare did not provide sufficient coverage for many seniors, particularly those with high prescription drug costs. [2] Finally, 5.75 million Americans age 55-64 could find no insurance coverage at all due to a number of factors including economics. [3]

The Affordable Care Act attempts to address these problems in a number of ways.

Closing the donut hole

One of the first things the ACA did was to close the “donut hole,” which forced many seniors to pay thousands for prescription drugs that were not covered under Medicare. In 2010 and 2011, more than 5.1 million seniors and people with disabilities saved over $3.1 billion in prescription drug costs due to an ACA provision which effectively closes the donut hole by providing a one-time, $250 rebate check to seniors who fell in the donut hole, and a 50 percent discount on brand-name drugs. [4]

Increasing preventative services

Under the ACA, seniors can now receive a number of preventative services such as flu shots, diabetes screenings, and an Annual Wellness Visit, free of charge. [4]

Controlling medicare costs

The ACA attempts to contain the costs of Medicare in a number of ways.

First, the law enacts tougher screening procedures and stronger penalties for those who commit Medicare fraud. Before the ACA was passed, many providers would charge Medicare for services that were never actually provided to any patients. [4]

Second, the ACA reduces payments to providers and Medicare Advantage Plans. [1] In addition, the law institutes a new Independent Payment Advisory Board which will be charged with issuing recommendations to keep Medicare costs within specified targets. These recommendations will be sent to Congress, and can only be overridden with a supermajority vote. [1]

Increasing coverage

For those who do not qualify for Medicare, the ACA will expand coverage in a number of ways by:

Establishing and funding a reinsurance program that will attempt to increase employer-provided health care insurance coverage for those age 55-64. [5]

Banning insurance company discrimination based on pre-existing health conditions like heart disease or cancer. [6]

Providing premium support tax credits to help poorer seniors afford health insurance plans. These premium supports will help individual who do not qualify for Medicare, and have an income below 400 percent above the poverty line. [7]

The ACA also mandates that all seniors below the age of 65 obtain some type of health insurance. Under the law, if individuals do not purchase health insurance, starting in 2014 they are subject to a tax penalty of up to one percent of their income; this will increase to up to 2.5 percent of their income in 2016.

Summary

For seniors, the Affordable Care Act attempts to strengthen the coverage under Medicare while simultaneously controlling the program’s total costs. For those who do not qualify for Medicare, the law will make private insurance more widely available and provide premium support tax credits for poorer individuals, but also mandate that all individuals purchase some type of health insurance plan.